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Test: Theory of Inflation- 2 - B Com MCQ


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10 Questions MCQ Test - Test: Theory of Inflation- 2

Test: Theory of Inflation- 2 for B Com 2024 is part of B Com preparation. The Test: Theory of Inflation- 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Theory of Inflation- 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Theory of Inflation- 2 below.
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Test: Theory of Inflation- 2 - Question 1
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What is the primary factor that influenced the breakdown of the Phillips Curve trade-off?

Detailed Solution for Test: Theory of Inflation- 2 - Question 1
The breakdown of the Phillips Curve trade-off was influenced by the fact that inflation expectations were not stable, causing shifts in the relationship between unemployment and inflation.
Test: Theory of Inflation- 2 - Question 2
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What does the Phillips curve show the relationship between?

Detailed Solution for Test: Theory of Inflation- 2 - Question 2
The Phillips curve depicts the relationship between inflation and unemployment, highlighting how changes in the level of unemployment can affect the rate of price inflation.
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Test: Theory of Inflation- 2 - Question 3
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According to the new-Classical view, what determines the impact of inflation on wage bargaining?

Detailed Solution for Test: Theory of Inflation- 2 - Question 3
In the new-Classical view, the impact of inflation on wage bargaining depends on inflation expectations. If workers expect higher inflation, they will negotiate for higher wage increases to compensate for it.
Test: Theory of Inflation- 2 - Question 4
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What was the consensus about managing the trade cycle after 1945?
Detailed Solution for Test: Theory of Inflation- 2 - Question 4
The consensus after 1945 was that policy makers should use fiscal policy to manage the trade cycle by stimulating aggregate demand during recessions and constraining it during inflation.
Test: Theory of Inflation- 2 - Question 5
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What is NAIRU?
Detailed Solution for Test: Theory of Inflation- 2 - Question 5
NAIRU stands for Non-Accelerating Inflation Rate of Unemployment, which is the rate of unemployment at which inflation stabilizes, indicating a level where prices rise at a consistent rate over time.
Test: Theory of Inflation- 2 - Question 6
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Which factor is NOT a cause of the inflationary episode after 2016, as mentioned in the text?
Detailed Solution for Test: Theory of Inflation- 2 - Question 6
The text states that the inflationary episode after 2016 was more associated with the post-Brexit fall in sterling, causing cost-push inflation, rather than supply-side policies.
Test: Theory of Inflation- 2 - Question 7
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According to the Phillips Curve, what is the impact of an increase in demand for labor due to government spending?
Detailed Solution for Test: Theory of Inflation- 2 - Question 7
According to the Phillips Curve, an increase in the demand for labor due to government spending leads to a decrease in unemployment, as firms compete for fewer workers, driving wages up.
Test: Theory of Inflation- 2 - Question 8
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Why did the Phillips Curve trade-off break down by the mid-1970s?
Detailed Solution for Test: Theory of Inflation- 2 - Question 8
The Phillips Curve trade-off broke down as inflation expectations became unpredictable, challenging the stable relationship between unemployment and inflation.
Test: Theory of Inflation- 2 - Question 9
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What does NAIRU stand for?
Detailed Solution for Test: Theory of Inflation- 2 - Question 9
NAIRU stands for Non-Accelerating Inflation Rate of Unemployment, indicating the rate of unemployment at which inflation stabilizes.
Test: Theory of Inflation- 2 - Question 10
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What is the main focus of the new microeconomics approach?
Detailed Solution for Test: Theory of Inflation- 2 - Question 10
The main focus of the new microeconomics approach is market clearing equilibria, where economic agents base their actions on expectations and market prices adjust to clear markets.
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